Stewart-Peterson Market Commentary

Closing Commentary - January 23, 2018

Top Farmer Closing Commentary 01-23-18

CORN HIGHLIGHTS: Corn futures ended quietly in another range-bound day, as futures closed lower, losing 3/4 cent in Mar and a penny in Jul. Mar closed at 3.51-1/4 and Jul at 3.68. New crop Dec closed at 3.85, down 3/4. A lack of new news allowed prices to drift today. Wheat prices were tugging on corn as wheat finished with losses of 4 to 5 cents, but support may have come from beans, which finished in positive territory by the tune of 1-1/2 to 2 cents. Export sales, normally due out on Thursday, will be pushed back to Friday due to the Government shutdown. However, that should be the only significant change from the shutdown effecting the corn market. Sideways trade continues. That's expected in big supply years and so, no surprise. However, at some point we believe the market needs to grind higher in order to entice farmers to be more aggressive sellers, as well as encourage producers to plant more corn. We believe corn is losing out to beans with the Nov bean futures trading above 10.00 again today. The ratio between new crop soybean and bean prices is 2.60. That should favor additional bean planting.

SOYBEAN HIGHLIGHTS: Soybean futures continued their upward momentum, albeit at a slow pace today with futures gaining 1-1/2 to 2-1/4 cents. Aug led today's rally closing at 10.05-1/4. Mar closed 2 higher at 9.86-1/4 off the day's high of 9.88-3/4, well off the low of 9.79-1/2. Perhaps more impressive, however, was the way prices slid through the 150-day moving average during the morning session, and then held support at the 40-day only to recover late in the session and finish positive. Meal, again, was the leader finishing anywhere from 10 cents to 1.00 per ton higher. Mar meal closed at its highest level since early December. Today's close in Mar was 339.60. The high in December was 351.2. The previous high was from July 12, 347.7. Our point is that the meal market is approaching both its summer, as well as its fall high. Good demand is the catalyst behind additional buying as of late.

WHEAT HIGHLIGHTS: A moderating forecast, rain throughout portions of the Midwest, and a technical weakness weighed on wheat futures today, which closed 4-1/4 to 5-1/4 lower. Wheat trade in recent months has been dominated by large inventories out of the Black Sea region, with Russia having an outstanding crop this year and being the new wheat supermarket to the world. That being said, wheat prices are consolidated and will likely have trouble moving lower, as U.S. producers will not likely sell into weakness. Upside potential, however, is limited. This is why we will continue to sell call options as opportunity presents itself and challenge prices to move higher. Most all calls sold in recent months have either expired without value or have been bought back relatively cheap, as the market remains stuck in a range-bound pattern. There is concern that once this warmup anticipated for the weekend occurs, wheat will be very vulnerable to freeze damage, since it is only January. We agree.

CATTLE HIGHLIGHTS: Cattle futures closed moderately higher today, finding follow-through buying interest with firming beef values and slow production. The nearby Feb contract closed 1.17 higher to 124.72, Apr closed 82 cents higher to 124.80, and Jun closed 75 cents higher to 116.30. Cattle slaughter yesterday was much lower than last Monday due to lower marketings caused by snowstorms. Just 88,000 head were killed yesterday versus 118,000 head killed last Monday. Beef prices, and particularly the higher quality cuts, showed strength for today's session. Choice cuts closed 21 cents higher yesterday afternoon to 205.07, and select cuts closed 64 cents lower to 199.52. At mid-session today, choice cuts were up another 1.37 to 206.44, and select cuts were up 34 cents to 199.86. The higher boxed beef values help validate the higher cash trade we saw last week, and if strength continues, should lend some support to the thought that beef demand will improve with economic strength. Price action showed little weakness today. The Feb contract closed at its highest point since December 1. With the sharp bounce started January 11, prices may be approaching overbought levels.

LEAN HOG HIGHLIGHTS: Hog futures put in a mixed session today with wide ranges and incisive trade. The nearby Feb contract closed 45 cents higher to 72.25, Apr closed 47 cents lower to 74.65, and May closed 25 cents lower to 79.40. Warmer weather this week will likely get slaughter back to normal levels, limiting the effects of slow marketings to start the week. Yesterday, 405,000 head were killed versus 393,000 head a week ago, and 440,000 head this same day last year. Pork values continue to show impressive strength. Yesterday afternoon, carcass cutouts closed 73 cents higher to 82.17, and were up another 1.21 by mid-session today to 83.38. Both ribs and picnics were up over 2.50 today, leading the carcass value higher and at least limiting losses in the futures markets. The Feb contract closed between its 10-day moving average resistance level and its 20-day moving average support level, but traded on either side of those moving average levels during the session. Feb price action looks uneventful compared to the Apr contract's session. While losses weren't catastrophic in Apr, the price charts are not pretty.

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